How much should Xcel customers pay to compensate the company's top executives?
Last year, Xcel filed a request to increase electric rates for Minnesota customers. If the request is approved as is, the typical customer's bill will go up by $10.27 per month, or $123.37 per year.
Xcel's Electric Rate Increase
You probably already know that Xcel Energy is currently asking to increase electric rates. But separate from that proceeding, the PUC is still making some final decisions about Xcel’s last electric rate increase that went into effect in 2023. One primary issue remaining from the last rate case is how much money Xcel customers are required to pay toward compensation for Xcel’s top ten highest paid executives.
How we got here
| From our article "Minnesotans are struggling with utility costs while executives are paid millions" |
|---|
|
In 2021, Xcel filed a petition to raise electric rates, which included a request to recover $22.5 million from its Minnesota customers to compensate the Company’s top ten highest paid executives. However, in making its initial filing, Xcel failed to include certain information regarding those costs—information they were required to provide under Minnesota law. Just a few days before the record closed, a commissioner noted the missing data, leaving Xcel and other parties no time to make arguments in support or opposition of allowing the costs. The PUC ultimately determined that Xcel’s request for $22.5 million was unreasonably high and sought to identify a way to reduce recovery to a more reasonable amount. The PUC decided to set an annual cap at $150,000 per executive, meaning Xcel could recover up to $1.5 million each year from ratepayers toward compensating its ten highest-paid executives. Notably, this cap doesn’t mean Xcel cannot pay its executives more than that amount in total compensation; that is just the limit it can recover from Minnesota customers through rates. Xcel’s shareholders can pay any additional compensation the Company determines is reasonable, and ratepayers in Xcel’s service territories in Colorado and elsewhere can also contribute.
Xcel disagreed with the PUC’s decision and appealed the question of executive compensation, along with several other issues, to the Minnesota Court of Appeals. On review, the Court agreed that the PUC lawfully found Xcel failed to justify its request for $22.5 million. However, the Court also concluded that the PUC’s decision to cap compensation at $150,000 was “arbitrary and capricious.” In essence, the Court found that the PUC did not provide sufficient explanation in justifying why that particular number was reasonable and sent the issue back to the Commission for further review.
CUB’s Position
Following the Court’s decision, the PUC opened a comment period in July, requesting input from stakeholders on the question of how much of Xcel’s $22.5 million in requested executive compensation costs customers should pay, if any. CUB, along with the Minnesota Office of the Attorney General and Department of Commerce, argued that the PUC should reject recovery of executive compensation in its entirety. Parties pointed to Xcel’s failure to timely file the information required by statute, which meant the company failed to prove the reasonableness of those expenses. To charge customers for executive compensation—like any other utility cost—the burden is on Xcel to show they are reasonable. According to Minnesota law, any doubt in reasonableness must be resolved in favor of the customers. Since Xcel failed to make arguments explaining why the amount requested was reasonable, the PUC should disallow any recovery.
If the PUC does not prohibit Xcel from charging ratepayers for any executive compensation, CUB and other parties offered some alternative caps the PUC could adopt. For example, the PUC could limit recovery for executive compensation at Xcel’s median employee compensation amount, approximately $120,597. This would at least be reflective of the level of pay other Xcel employees receive, including those who provide engineering, planning and customer care services—duties that more clearly align with serving the interest of Xcel customers.
What’s Next?
The issue is currently awaiting review by the PUC. We anticipate a hearing will be scheduled sometime in the next few months where the Commission will make its final determination. Whatever the PUC decides in this case will not necessarily have an impact on Xcel’s current rate case, since the decision in the 2021 rate case hinged on Xcel’s failure to file information required by law. Xcel did include this information in its current rate increase request. Stay tuned to CUB’s website and newsletter for updates on the outcome and how it will impact Minnesotans.
If you're concerned about Xcel's request to raise electric rates, you can submit a comment to the PUC by clicking the button below. Or, send an email to consumer.puc@state.mn.us and be sure to reference Docket 24-320. Your comment— including your name, email address, and any other information you share—will become a part of the public record. Here are some tips to make your comment as effective as possible.